•The construction or provision of oil rigs, drilling
equipment and other energy related service and
equipment, including seismic data collection.
•Engaged in the exploration, production, marketing,
refining
fi i and/or
d/ transportation
i off oilil andd gas products,
d
coal and other consumable fuels.
Telecommunicati Utilities Cash Dividend 4% Receivables
on Services
3%
0%
4%
Materials
3%
Consumer Discretionary Consumer Staples
9%
12%
Tech
22%
Energy
12%
Industrials
9%
Health Care
12%
Financials
10%
•
•
•
•
•
•
•
COAL AND CONSUMER FUELS
OIL & GAS DRILLING
OIL & GAS EQUIPMENT AND SERVICES
OIL & GAS EXPLORATION AND PRODUCTION
OIL & GAS INTEGRATION
OIL & GAS REFINING AND MARKETING
OIL & GAS STORAGE
Market Capitali ation
Market Capitalization
3%
1% 0%
6%
7%
15%
68%
Major Integrated Oil & Gas
Oil & Gas Refining & Marketing
Oil & Gas Drilling & Exploration
Oil & Gas Equipment & Services
Oil & Gas Pipelines
Nonmetallic Mineral Mining
Independent Oil & Gas
Industry
Net Profit ROE Div. Yield Price to Margin P/E %
%
Book
(mrq)
Price To Free Cash Flow Major
j Integrated
g
Oil & Gas
10.2
18.1
3.389
1.94
7.9
177.6
Oil & Gas Refining & Marketing
14.1 15.3
2.527
2.08
3
97
Oil & Gas Drilling & Exploration
13 4
13.4
11 2
11.2
2 496
2.496
1 89
1.89
13 6
13.6
-42.4
42 4
Independent Oil & Gas
16.8
11.4
1.89
2.28
8.2
-83
Oil & Gas Equipment & Services 27.5
9.7
1.077
5.29
8.5
-114
Oil & Gas Pipelines
38.4
11.3
4.876
4.02
6.1
-23.4
Nonmetallic Mineral Mining
12.7
5.1
4.54
2.72
5.9
-130.4
PRICE RETURNS BY SECTOR
Index Name
Utilities
Adjusted Market Index
Cap ($Million) Level 1 Day MTD
QTD
YTD
427,824.10 178.8 1.38%
1.15%
4.71% 12.22%
Health Care
1,331,027.77
393.4
1.69%
1.30%
6.98%
7.84%
Cons Staples
1,276,079.58
323.5
1.13%
1.13%
5.48%
6.57%
E
Energy
1 447 333 01
1,447,333.01
534 9
534.9
1 84%
1.84%
3 29% 20.80%
3.29%
20 80%
5 55%
5.55%
Cons Disc
1,228,300.39
311.4
2.51%
1.07%
13%
5.36%
Info Tech
2,254,426.91
423.1
2.11%
0.36%
11.87%
4.58%
Telecom Svc
349,971.44
126.1 0.98%
1.58%
3.37% -2.03%
Industrials
1,213,902.76
291 2.37%
1.12%
15.19% -3.36%
Materials
414,133.89
220.9 2.36%
1.79%
19.71% -7.80%
7.80%
Financials
1,565,316.31
177.8 2.22% -2.09%
11.77% -17.23%
Barriers to Barriers
to
Entry
HIGH
Buyer Power
Moderate
Rivalry
Moderate
Threat of Substitutes
LOW
Supplier Power
Moderate
Maturity
Expansion
Decline
Growth
Start Up
The Energy Sector is currently in the Mature Phase of the Business
Life Cycle.
y Somewhat stable pprofits thought
g healthyy competition
p
is
present. Currently Energy companies are searching for new
opportunities to sustain cash flow.
UUnited
it d States
St t
18 690 000
18,690,000
China
8,200,000
Japan
p
4,363,000
India
2,980,000
Russia
2,740,000
Brazil
2 460 000
2,460,000
Germany
2,437,000
Saudi Arabia 2,430,000
Korea, South
2,185,000
Canada
2,151,000
* total oil consumed in barrels pper dayy (bbl/day)
y
-Energy Consumption driven by Non-OECD Countries
-Coal Consumption driven by Non-OECD Asian Countries
-Transportation leads liquid consumption due to Globalization
Venezuela
296,500,000,000
Saudi Arabia
264,600,000,000
Canada
154,700,000,000
Iran
154,700,000,000
Iraqq
115,000,000,000
, , ,
Kuwait
104,000,000,000
United Arab Emirates
97 800 000 000
97,800,000,000
Russia
74,200,000,000
Lib
Libya
47 000 000 000
47,000,000,000
Nigeria
37,500,000,000
*BBL
-Electricity Generation by Fuel Type
Type, Doubling by 2035
Middle
Expansion
CAPITAL GOODS
Early TRANSPORTATION
Expansion
p
ENERGY
Late Expansion
TECHNOLOGY
CONSUMER STAPLES
CONSUMER CYCLICALS
FINANCIALS
Late Contraction
UTILITIES
Early Contraction
EU DEBT CRISIS
ARAB SPRING
EMERGING MARKETS – CHINA AND INDIA
NON OECD COUNTRY GROWTH
Algeria
Angola
Ecuador
Iran
I
Iraq
Kuwait
Libya
Nigeria
Qatar
Saudi Arabia
United Arab
E i t
Emirates
Venezuela
Global organization dedicated to stability in and
shared control of the petroleum markets
-Collectively hold 79% of world crude oil reserves and 44% of
the world
world’ss crude oil production
-Worldwide consumption will increase by 5.3 percent to 92.9
million
illi barrels
b l a day
d in
i the
th nextt four
f years
-Control diminished due to discovery and development in
Alaska, North Sea, Canada, Gulf of Mexico and Russia
US DEBT CEILING CRISIS
GOVERNMENT REGULATIONS
INVESTMENT IN SHALE PLAYS
MOVEMENT TOWARDS RENEWABLE ENERGY
BAKKEN- 225k Barrels a day
$25 Billion invested in 2011
Undiscoverd Vol – 3.65 Billion Barrels
• Energy Sector stocks have a high correlation with
oil prices
• GDP lacks a correlation with Energy Sector Stock
price
i movement
• CAPEX investments in Mining and Oil appear to
pprecede an increase in Energy
gy Sector stock
prices.
• Cash intensive industry
• Healthyy revenue and earnings
g
• Higher than market Return on Equity
Absolute Basis
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
21.3
23.9
3.8
14
1.4
10.1
Low
6.1
7.8
1.4
05
0.5
5.0
vs. SP500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
1.1
1.2
1.4
1.0
0.9
Low
0.5
0.5
0.7
0.6
0.6
Median
13.3
12.5
2.5
10
1.0
7.3
Median
0.7
0.8
1.0
0.8
0.7
Current
12.5
10.7
2.0
10
1.0
6.9
Current
0.9
0.9
1.0
0.8
0.8
Oil&Gas
Equipment/Services
vs. SP500
Median
Current
P/Trailing E
P/F
P/Forward
dE
P/B
P/S
P/CF
1.5
13
1.3
1.5
1.6
1.3
1.5
11
1.1
1.3
1.9
1.3
Oil&Gas Integrated
vs. SP500
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
1.2
1.0
0.7
2.4
1.1
1.5
1.0
0.7
1.5
0.9
Oil and Gas Refining
vs. SP500
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
0.7
0.6
0.5
0.2
0.6
0.8
0.4
0.6
0.1
0.6
Oil&Gas Exploration
and Production vs.
SP500
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
0.7
0.8
0.8
2.1
0.6
1.4
1.2
0.9
2.8
0.8
• Increase the weight by 50 bps.
• Attractive sector and currently only 14 bps overweight.
• Factors
– Recent quarters performance
– Oil prices continue to rise
– ROE has always been above the S&P 500
– Future demand for crude will increase greater than supply